Able is concerned about its upcoming buyout by Walden, and rightly so. This family-owned company is floundering due to mismanagement. Walden seeks to obtain it because of its market share in the circular saw segment, its innovative capabilities in cordless tools, and the fact that despite its troubles it has managed to make a profit two out of the last four years. The philosophies of the managements are so different, however, that it will take some adjusting to get the subsidiary to perform the way Walden wants.
Able needs an investment time and resources to maintain its production, let alone turn itself around. This is not how Walden operates. The best choice would be for both sides to make some concessions.
Walden will especially need to come to terms with the need for capital investment in Able. A new plant simply must be built. If Walden tries to draw profits out of Able with the old ones they will be squeezing blood from a stone, and the employees know this. Condensing the company's resources into a few product lines will make this less expensive. Walden also has the financial resources to make this investment from its own funds or negotiate a lower rate of interest for debt, therefore making the cost of capital for the investment lower.
Able should also phase out many of its product lines where it is having difficulty competing. Walden can then make investments in the remaining areas, knowing that these will continue to grow and that profitability will increase once the investments reap a profit. These invested resources will make it difficult for Able to meet Walden's profitability benchmarks because its assets will be higher, but they will also make Able more valuable as a whole in case Walden decides to sell it again.
Some of Walden's strengths will help Able. One example is Walden's superior tracking of inventory. Because of its wide array of products, Able probably keeps a large amount of ...